Unscrupulous people engaging in fraudulent transactions and exploiting businesses for their own financial gain is an often lamented yet common topic of commerce lore. While the fundamental nature of most fraudulent schemes has changed little over time, such schemes have adapted to take advantage of technological advances. For example, with the advent of the Internet, scams that were once limited to a specific geographic area can now be implemented on a global scale. Indeed, the same technological advances that have been a godsend to the banking industry have also become a powerful tool for criminals. As a result, online stores are said to experience fraud 17 times more often than traditional retail stores.
Similarly, credit cards have greatly improved the convenience of shopping in both traditional retail stores and online stores. Unfortunately, credit-card fraud has become increasingly common. None of the credit-card associations disclose exact loss-rate figures for credit card fraud; however, it is believed that credit card fraud losses amount to about $1.5 billion a year. Unfortunately, it appears that credit-card companies have yet to come to grips with the full scope of the problem. While credit card companies claim to have a handle on the problem, when fraud happens, everyone points fingers at everyone else (processors, banks, credit card issuer, and the merchants). In addition, law enforcement and government agencies tend to only investigate big cases. In the end, no one takes the blame for credit card fraud and such costs are simply passed on to consumers.
Most credit card crime involves cards lost by or stolen from cardholders. Unethical retail store clerks and restaurant employees, for example, may steal card numbers when a customer pays for services with a credit card. Alternatively, a scam artist can go through the trash of any merchant or customer garbage, get valid credit card numbers, and use them on the Internet. Sometimes crooks are able to listen while you dictate your account number over a public phone and copy it down for later use. Some crooks even monitor cellular and cordless phone conversations, hoping to overhear a credit card transaction.
While it may be true that credit card fraud is something that cannot be completely eliminated, credit card fraud can clearly be managed. Merchants must develop a balance between using safeguards to prevent fraud while not creating too many hoops for customers to jump through. One notable common attribute of almost all fraudulent transactions using a credit card relates to the credit card number. The credit card number on most prior art credit cards is a static number. However, one prior art device that may be used as a credit card while generating a dynamic card number is disclosed in U.S. Pat. Nos. 4,856,062 and 4,885,778, issued to Weiss, and such patents are incorporated by this reference for all purposes. While the Weiss devices do offer improved security over prior art devices, they still have their weaknesses. For example, if a user losses a “Weiss” type device, they can still use the card. What is needed is a device that can generates a dynamic card number but does not display the number until the card holder's (a user) identify is verified.
Other attempts to prevent credit card fraud include the development of smartcards. The term “smartcard” refers generally to wallet-sized cards incorporating a processor or micro-controller to store and manage data within the card. One advantage of smartcards is leveraged through the use of sophisticated memory management and security features. One such smartcard invention is disclosed in U.S. patent Bonalle et al. U.S. Pat. No. 7,341,181 which is incorporated by this reference for all that it discloses. While Bonalle discloses many security features that improve the security of financial transactions, addition protections are needed. For example, what is needed is a credit card that has a static or dynamic number that is only displayed after a user has been verified as an authorized user. In addition, the card should also provide a visual and/or audio signal indication the result of a user verification process.
Additionally, there is a need for such an improved device to be incorporated in an electronic device already carried or used by a card holder. For example, what is needed is a “smartcard” that can clone its authorization process to information and/or processes to an external digital device such as a cell phone, personal digital assistant (PDA), or other such devices.
In addition to credit card fraud, criminals often steal “manually” by entering an unauthorized area or taking an item (e.g. vehicle, money, documents, etc.). What is needed is an apparatus that can be used to make secure transactions, enter restricted access areas, and activated restricted items (such as vehicles).